|
on China |
| By: | Pei Li, Yi Lu, Tuan-Heww Sng |
| Abstract: | What happens when subnational boundaries are badly drawn? We use China as a laboratory to investigate the rami cations. As Chinese provincial and long-standing socioeconomic boundaries are not fully aligned, counties of the same province may not share the same regional identity. Using Deng Xiaoping's eco-nomic liberalization campaign in 1991-92 to implement a difference-in-differences, we find that the annual growth differential between non-is located and dislocated counties increased by 3.1 percentage points after Deng's campaign galvanized the provinces to pursue economic expansion. We also uncover evidence of discrimination against the dislocated counties by the provincial authorities. |
| Keywords: | Artificial borders, Regional Favoritism, Decentralization, China |
| JEL: | D73 H11 H77 O43 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:auu:hpaper:059&r=cna |
| By: | Johansson, Anders C. (Stockholm China Economic Research Institute); Liu, Dan (Shanghai University of Finance and Economics); Zhen, Maosheng (Shanghai University of Finance and Economics) |
| Abstract: | In this paper we examine the impact of foreign direct investment (FDI) on local urban wage inequality in China. We find that the within-city college premium is larger for cities characterized by a higher degree of FDI penetration. We then try to establish the causal impact of FDI penetration on city inequality using historical Christian influence as an instrumental variable. In addition, firm-level evidence shows that FDI has amplified both between-firm inequality and within-firm inequality. FDI firms do not only hire relatively more high-skilled workers but also provide relatively higher wages to high-skilled workers compared to domestic firms. Finally, an individual-level analysis shows that FDI has a spillover effect on low-skilled workers, but the magnitude of that effect is much smaller than the effect on high-skilled workers. |
| Keywords: | foreign direct investment; skill premium; inequality; China |
| JEL: | F21 I30 R11 |
| Date: | 2017–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2017-045&r=cna |
| By: | Qichun He (Central University of Finance and Economics); Heng-fu Zou (Central University of Finance and Economics; World Bank) |
| Abstract: | The government reaps seigniorage revenue from higher rates of money growth, hiring away more workers from entrepreneurs (the government crowding-out effect). There is also a positive seigniorage effect when part of the revenue goes to entrepreneurs, acting as a subsidy to R&D. When the government retains a larger share of the revenue, the government crowding-out effect dominates, and inflation retards growth. When entrepreneurs get the larger share, the seigniorage effect dominates, and inflation increases growth. Both OLS (ordinary least squares) and IV (instrumental variable) regressions using time-series data during 1979–2014 in China show that differenced inflation (to ensure stationarity) has a significantly positive effect on growth. When we use the level of inflation, we find that a 1 percentage point increase in annual inflation would bring a 0.53 percentage point increase in annual growth of per worker real GDP. The robust, causal effect of inflation on growth in China provides support for our theory. |
| Keywords: | Seigniorage revenue, R&D, Augmented Solow model, Instrumental variables estimation |
| JEL: | R12 H87 C73 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:601&r=cna |
| By: | Lleo, Sebastien; Ziemba, William T. |
| Abstract: | Predicting stock market crashes is a focus of interest for both researchers and practitioners. Several prediction models have been developed, mostly for use on mature financial markets. In this paper, we investigate whether traditional crash predictors, the price-to-earnings ratio, the Cyclically Adjusted Price-to-Earnings ratio and the Bond-Stock Earnings Yield Differential model, predicts crashes for the Shanghai Stock Exchange Composite Index and the Shenzhen Stock Exchange Composite Index |
| Keywords: | equity markets; crashes; China; BSEYD; CAPE |
| JEL: | G10 G12 G14 G15 |
| Date: | 2017–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:85131&r=cna |
| By: | Clark, John (Federal Reserve Bank of New York) |
| Abstract: | We investigate the drivers of daily changes in the exchange value of the Chinese currency (CNY) since early 2016, when a new regime was introduced for setting the fix—the midpoint of the CNY’s daily trading range against the U.S. dollar. Daily changes in the fix, which is announced just prior to the onset of onshore trading, are shown to be highly predictable and very responsive to the change in the CNY/USD rate during the previous day’s onshore trading session and to changes in dollar cross rates. While highly predictable, the fix is shown to have uneven predictive power for the subsequent evolution of the currency’s exchange value. Daily changes in the closing value of the exchange rate have centered on the changes implied by the fix to a much greater extent in months with higher intervention intensity, but less over the course of 2017, as intervention has waned. We document ways in which the short-run behavior of the CNY/USD exchange rate has evolved to more closely resemble behavior generally observed in freely floating currencies, even as the CNY continues to exhibit unusually low daily volatility. On days of broad dollar strengthening, the CNY is found to depreciate against the dollar but appreciate against the CFETS index, the authorities’ main reference basket; the CNY now typically appreciates less than half as much as previously, when the currency was being managed primarily against the dollar. |
| Keywords: | Chinese currency; Chinese yuan; CNY; exchange rate regime; currency policy; flexible exchange rate; intervention; financial development |
| JEL: | F3 F31 F33 G15 O16 |
| Date: | 2017–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:828&r=cna |
| By: | Baojing Sun |
| Keywords: | Pricing weather options; weather-based derivatives; stochastic process and econometric modeling; growing degree days; agricultural finance |
| JEL: | Q14 G11 G12 G32 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:rep:wpaper:2017-05&r=cna |
| By: | Feng, Xunan (Southwestern University of Finance and Economics); Johansson, Anders C. (Stockholm China Economic Research Institute) |
| Abstract: | We hypothesize that political uncertainty has an adverse effect on investments in activities related to innovation. Combining two hand-collected data sets on changes in local government officials and research and development (R&D) activity at the firm level in China, we examine how political turnover influences investments in R&D. We find that a change in local political leaders is associated with a significant decrease in R&D activity. This result is robust to various robustness tests. The decrease is larger when the new political leader is promoted from outside the city in question. Moreover, the decrease is significantly larger for privately controlled firms, firms operating in regions characterized by weak economic institutions, and firms within R&D-intensive industries. Our findings suggest that political uncertainty constitutes an important channel through which the local political process influences activities related to innovation. |
| Keywords: | Innovation; R&D expenditures; Political turnover; Political uncertainty; Local officials; China |
| JEL: | G18 G32 G38 O30 O31 O32 |
| Date: | 2017–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2017-044&r=cna |
| By: | Liutang Gong (Guanghua School of Management and LMEQF, Peking University); Chan Wang (School of Finance, Central University of Finance and Economics); Fuyang Zhao (Guanghua School of Management and LMEQF, Peking University); Heng-fu Zou (China Economics and Management Academy, Central University of Finance and Economics) |
| Abstract: | In this paper, we introduce a complementary relationship between consumption and labor hours by revising the household's period utility function in Liu et al. (2013). The revision concomitantly allows for a finite Frisch elasticity of labor supply and a stronger consumption smoothing motive. We find that, in general, the estimation of Liu et al. (2013) is quite robust. In addition, the propagation mechanism of the credit constraint triggered by a housing demand shock still persists. However, the amplification effect of the credit constraint triggered by the housing demand shock on key macroeconomic variables is greatly muted. We also find that, except for land price fluctuations, the housing demand shock cannot act as the primary force to drive the fluctuations in other macroeconomic variables. |
| Keywords: | Collateral constraint, Housing demand shock, Nonseparable preferences, Macroeconomic fluctuations |
| JEL: | E5 F3 F4 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:605&r=cna |
| By: | Chen, Yi; Cowell, Frank A. |
| Abstract: | The evidence on rank and income mobility in China reveals an important change around the year 2000. Using panel data from the China Health and Nutrition Survey we show that rank mobility fell markedly from the decade immediately preceding the millennium to the decade immediately following: in this respect China is becoming noticeably more rigid. By contrast income mobility has carried on increasing; so has income inequality. The simultaneous increase in rigidity and inequality presents China with a challenging policy problem. |
| Keywords: | D63; income distribution; mobility measurement |
| JEL: | J1 |
| Date: | 2017–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:65995&r=cna |
| By: | Goodhart, Charles; Pradhan, Manoj |
| Abstract: | Between the 1980s and the 2000s, the largest ever positive labour supply shock occurred, resulting from demographic trends and from the inclusion of China and eastern Europe into the World Trade Organization. This led to a shift in manufacturing to Asia, especially China; a stagnation in real wages; a collapse in the power of private sector trade unions; increasing inequality within countries, but less inequality between countries; deflationary pressures; and falling interest rates. This shock is now reversing. As the world ages, real interest rates will rise, inflation and wage growth will pick up and inequality will fall. What is the biggest challenge to our thesis? The hardest prior trend to reverse will be that of low interest rates, which have resulted in a huge and persistent debt overhang, apart from some deleveraging in advanced economy banks. Future problems may now intensify as the demographic structure worsens, growth slows, and there is little stomach for major inflation. Are we in a trap where the debt overhang enforces continuing low interest rates, and those low interest rates encourage yet more debt finance? There is no silver bullet, but we recommend policy measures to switch from debt to equity finance. |
| Keywords: | demography; global labor supply; ageing; real interest rates; inequality |
| JEL: | N0 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:84208&r=cna |